BB criticises JBL for sanctioning loan against a defaulter

FT ONLINE

Bangladesh Bank Governor Fazle Kabir has criticised Janata Bank Managing Director Md Abdus Salam Azad over the latter's approval of a fresh loan of Tk245 crore against a defaulter, the Bangladesh Sugar and Food Industries Corporation.

The Bangladesh Bank governor's criticism came at a meeting with the managing directors of four state-owned banks – Sonali, Janata, Rupali and Agrani – on the progress of their memoranda of understanding relating to their financial performance. The meeting took place at the Bangladesh Bank headquarters on Thursday.

The board of Janata Bank recently approved a loan of Tk245 crore against the government organisation despite the fact that it already has a defaulted loan of Tk420 crore with the bank.

Ajit Kumar Paul, chairman of the Sugar and Food Industry Corporation and also a director of the bank, allegedly influenced the bank to sanction the loan against his organisation.

The central bank asked the Janata Bank MD to explain within 10 days why he had approved the loan against the defaulter in violation of the Bank Company Act.

Under the provisions of the Bank Company Act, a bank cannot approve loans for a defaulter by any means.

It is understood that MD Abdus Salam Azad did not reply to the central bank's letter even a month after it had been sent to him.

Earlier, in January last year, the bank was fined Tk10 lakh for not replying to the central bank's show-cause notice.

The central bank governor raised the issue of the approval of the loan against the defaulter during the meeting, noting that the organisation has no capacity to make payment. Moreover, it is an organisation which has defaulted in repaying loans taken earlier. The governor demanded to know how the bank could sanction a new loan despite the organisation's default record, according to meeting sources.

In his response, Azad offered the defence that the loan has not been disbursed yet. The loan will be given only if the organisation gives the government a guarantee of repayment, he said.

The Sugar and Food Industries Corporation has over Tk6,000 crore in loans with the four state-owned banks and has been unable to properly continue repayments.

It defaulted on loans with some other banks. The government guarantee against Janata Bank's previous loan expired in December 2018, according to the bank.

Azad said the loan had been sanctioned subject to a regularising of the organisation's default loan. If the organisation cannot come out of the default status, the loan will not be disbursed, he said.

When asked whether there was any influence from the director, he said, "You had better ask him [Ajit Kumar Paul] about it."

Despite repeated attempts, Ajit Kumar Paul could not be reached for his comments on the issue. He was requested to respond through a text message, but he did not reply.

The Bangladesh Sugar and Food Industries Corporation sought a loan from Janata Bank despite being in possession of goods worth Tk300 crore. Instead of selling the goods, it approached the bank for a loan to make payments to its employees.

In the loan application, it said it could not sell its stockpiled sugar as its price in the market is lower than the production cost.

There have been allegations that the corporation is reluctant to sell sugar in the market in order to benefit sugar importers. If local sugar is sold, prices of imported sugar will go down, market insiders have alleged.

The employees of the corporation, in collusion with a section of importers, have been wasting its own stored sugar for a long time, said industry insiders.

It is notable that every chairman of the organisation has seemed to resolve a financial crisis by taking loans from banks instead of clamping down on corruption within it.